Does anyone know whether a Director's Salary of £420 a month counts as part of personal allowance?
I never expected to go back to full time employment and have not got a P45. I will still be on my Limited Company payroll as a nominal amount just to cover for insurance of our premises but will be £5 a month on BR rate like my husband the other director is just for insurance purposes as he had full time job elsewhere when we started Limited Company and take monies out of the company through Director's Loan then Dividends.
If the Director's Salary does count of the personal allowance I think I am better P45 me, then re-set up on Limited Company with P46 on BR rate instead then that way my tax will be right on new full time job.
Any advise appreciated as I am having brain dead moment and can't remember anything about Directors salaries.
Directors have the same personal tax allowance as everyone else and, providing they have no other income, can draw a tax free "Directors Fee" of £539.58 per month. If they have another source of income that uses up their personal allowance then they are better off not drawing a "Fee" but only drawing dividends. Interim dividend payments can be made throughout the year but the Director must realise that at year end, if there is insufficient profit to cover those dividends, then it will be converted to Directors loan. The Director then has 9 months from year end to pay back the loan to the company or suffer tax by HM R & C. This rarely happens because the comapny produces enough profit to cover the Directors drawings.
Please do not refer to Directors income as "Salary" or "Wage", it is a "Fee" for services rendered. If you class it as a "Salary2 HM R & C wil expect tax to be paid on all your drawings. If it is your "Fee" then it can be converted to payment of dividends at year end.
